Rev. Rul. 57-594

The Internal Revenue Service has been asked whether the principles set forth in Revenue Ruling 54-329, C.B. 1954-2, 405, relating to the rebuilding and reconditioning of automobile parts or accessories, may be applied in determining the consequence of the tax, imposed by section 4141 of the Internal Revenue Code of 1954, with respect to the restoration and sale of used television picture tubes.

While Revenue Ruling 54-329 relates to automobile parts or accessories, it embodies certain principles which are equally applicable in determining the tax consequence of rebuilding, reconditioning or repairing other articles subject to manufacturers excise tax.

It is held that where a used television tube is restored to useful condition by merely treating or reconditioning it, without opening the tube, such operation does not constitute a manufacturing (rebuilding) process and no tax liability is incurred. However, where such a tube is opened for recoating of the screen or for replacement of the electron gun, such operation constitutes a manufacturing (rebuilding) process, rather than a reconditioning operation.

A person who restores tubes in the latter manner for sale or for use as components of other articles for sale is regarded to be the manufacturer (rebuilder) thereof and is liable for tax on his sale or use of the rebuilt tubes to the same extent as a manufacturer of new television picture tubes. The specific statutory provision for exclusion from the sale price of the value of a like part or accessory accepted in exchange on the sale of a rebuilt automobile part or accessory does not apply to any other articles subject to manufacturers' excise tax. Accordingly, the rebuilder's taxable wholesale price of each rebuilt tube must include any amount allowed for a used tube accepted in exchange.

For conditions required to establish that a particular transaction is a nontaxable repair operation, see Revenue Ruling 57-593, page 723, which amplifies Revenue Ruling 54-329.